Question About Term Conversion

[NWBenefitProvider]

I inherited a client who has a term policy with his business partners as the beneficiary. His initial 10 year term is up in a few months and the business owners want to continue his coverage. When he applied, he qualified at the best health class possible with Ohio National. They also just told me that he has advanced Prostate cancer with a life expectancy of less than 5 years. :(

So, we can't just re-write a new term policy due to current health.

The options as I see them are to continue with the ART which starts at about $3,000 the first year and then by year 5 is $17,000. Total cash outlay of $36,000 over 5 years, higher if they extend beyond year 5.

OR

Convert to the single policy available (Ohio National) Virtus Basic. I ran an illustration and they can pay a premium of $6,000 for 3 years and it will fund the policy long enough to provide 7 years of death benefit. Doing the math, this seems to be a no-brainer. However, I have never done a term to permanent conversion so, knowing this is the ONLY available conversion option, would any of you see this as the best solution like I do?

Appreciate any input.

Thanks.

 

[WinoBlues]

I inherited a client who has a term policy with his business partners as the beneficiary. His initial 10 year term is up in a few months and the business owners want to continue his coverage. When he applied, he qualified at the best health class possible with Ohio National. They also just told me that he has advanced Prostate cancer with a life expectancy of less than 5 years. :(

So, we can't just re-write a new term policy due to current health.

The options as I see them are to continue with the ART which starts at about $3,000 the first year and then by year 5 is $17,000. Total cash outlay of $36,000 over 5 years, higher if they extend beyond year 5.

OR

Convert to the single policy available (Ohio National) Virtus Basic. I ran an illustration and they can pay a premium of $6,000 for 3 years and it will fund the policy long enough to provide 7 years of death benefit. Doing the math, this seems to be a no-brainer. However, I have never done a term to permanent conversion so, knowing this is the ONLY available conversion option, would any of you see this as the best solution like I do?

Appreciate any input.

Thanks.

Assuming he still has a conversation privilege and it was is not a Plus policy. Yes convert it. I would build it as if he were going to out live the prognosis. The terminal illness rider may be included in the conversion. Is there waiver of premium on the policy?

 

[NWBenefitProvider]

Assuming he still has a conversation privilege and it was is not a Plus policy. Yes convert it. I would build it as if he were going to out live the prognosis. The terminal illness rider may be included in the conversion. Is there waiver of premium on the policy?

It was not the Plus series. No waiver of premium on the policy. It is being paid by the other partners and could continue to be paid even if he is unable to work.

I also ran the illustration on the conversion to extend out to 10 years. In that case it was $6,000 for each of the 3 years and then the minimum to keep it in force and pay the full death benefit would be $642 per year. This seemed lie a good conservative approach in case he does outlive the current estimate.

The policy is really just to provide money back to the company for a buyout or something and he has a different policy for his family which is still fine for several years.

 

[VolAgent]

It was not the Plus series. No waiver of premium on the policy. It is being paid by the other partners and could continue to be paid even if he is unable to work.

I also ran the illustration on the conversion to extend out to 10 years. In that case it was $6,000 for each of the 3 years and then the minimum to keep it in force and pay the full death benefit would be $642 per year. This seemed lie a good conservative approach in case he does outlive the current estimate.

The policy is really just to provide money back to the company for a buyout or something and he has a different policy for his family which is still fine for several years.

I would also show a lifetime level pay option or one designed to age 90 or more. One they might go for that instead, and two you have done your due diligence and CYA in case he recovers and lives longer than expected.

But yes, convert all the way versus ART. At least now they know their expenses and this is almost certainly his only chance, so if you miss it he won't have another one but will be stuck with the ART until he is insurable again, if ever.

 

[WinoBlues]

It was not the Plus series. No waiver of premium on the policy. It is being paid by the other partners and could continue to be paid even if he is unable to work.

I also ran the illustration on the conversion to extend out to 10 years. In that case it was $6,000 for each of the 3 years and then the minimum to keep it in force and pay the full death benefit would be $642 per year. This seemed lie a good conservative approach in case he does outlive the current estimate.

The policy is really just to provide money back to the company for a buyout or something and he has a different policy for his family which is still fine for several years.

Sounds like a great example of the value of convertible term. I am thinking the ABR will be automatic on that plan as well. It could be valuable for them in a couple years. Maybe for an early buy out. Might be something to review in his personal plan as well.

 

[VolAgent]

Sounds like a great example of the value of convertible term. I am thinking the ABR will be automatic on that plan as well. It could be valuable for them in a couple years. Maybe for an early buy out. Might be something to review in his personal plan as well.

I have never understood why anyone would write the Basic term policy. I get why ONFS has it, top of the list on comparative quoters. But Plus is generally so little more that an agent should always just write it instead.

 

[NWBenefitProvider]

Sounds like a great example of the value of convertible term. I am thinking the ABR will be automatic on that plan as well. It could be valuable for them in a couple years. Maybe for an early buy out. Might be something to review in his personal plan as well.

That's a good point. I didn't write this or his personal policy, but I can certainly mention that he should look at the ABR potential.